Small-business credit card vs. corporate credit card: Which one suits your business best?

As a small-business owner, you likely have one or more business credit cards. As your business expands, it might be wise to consider switching to a corporate card instead of sticking with a small-business card.

Here's what you need to know about both card types and when it's time for your company to transition from one to the other.

What exactly is a corporate credit card?

A corporate credit card is linked to a corporate account, typically available only to businesses with an annual revenue of $4 million or more. Generally, the company—not the owner or employees—bears the responsibility for bill payments, meaning account approval is contingent on the company's financial status.

Corporate cards are especially beneficial for businesses that handle numerous transactions and have multiple individuals authorized to make purchases on behalf of the company.

Comparing business credit cards and corporate credit cards

The main distinction between corporate cards and small-business cards lies in who is accountable for the debts and fees. With small-business cards, the primary cardholder is personally responsible, whereas on corporate cards, the company assumes that responsibility.

As your business expands and you have more employees authorized to make purchases on its behalf, using corporate cards linked to a corporate account may be a wiser approach than issuing authorized-user cards or employee cards associated with a small-business card in your name.

Another important distinction could be the rewards structure. On small-business cards, the primary cardholder receives the rewards. In contrast, with corporate cards, the company typically retains the rewards, and the earning rates are often less generous than those found on many small-business cards.

If your employees are currently allowed to charge business expenses on their personal cards and then get reimbursed, some may view the shift to a corporate card, where the company benefits from the rewards, as a significant loss of perks.

Advantages and disadvantages of corporate cards

If you're thinking about transitioning your business to a corporate account and providing corporate cards to employees for expenditures on behalf of your business, here are some key advantages and drawbacks—for the company, you, and your employees.

Advantages of corporate cards

• No personal liability for the business owner or employees (unless the corporate card is established as an individual liability account, which is rare)
• Employees don’t have to wait for reimbursement
• Simplified reporting and expense tracking
• The ability to set spending limits for each employee’s card, and often restrict expenses to specific categories
• The company accrues rewards instead of the employees (though, in some cases, the company might allow employees to earn rewards on their expenditures)

Drawbacks of corporate cards

• Lower potential for earning rewards compared to similar small-business cards
• Higher fees for additional cardholders than those on comparable small-business cards
• Restricted to businesses with millions in revenue and strong financials
• Employees typically do not earn rewards on their purchases

Transitioning from a small-business credit card to a corporate credit card

If your business generates millions in annual revenue, handles a large volume of transactions, or seeks greater control over employee spending, providing corporate cards to employees could be the right choice.

There are drawbacks, as you may encounter higher fees for each employee card, and your potential for earning rewards might decrease. However, corporate cards can be a viable option, particularly if you want to shift liability from the business owner and individual employees to the company.

Key takeaways

If you’re a business owner and your company qualifies for a corporate credit card, it could be worthwhile to consider—if for no other reason than the ability to better shield yourself from liability, which can be a significant advantage in itself.

You might also be seeking a more effective way to monitor your employees' expenditures. When you have dozens or even hundreds of employees, the tools offered by business credit cards may no longer meet your needs adequately.